Stock market rallies after strong jobs report

Investors help Dow top 16,000

Published: Saturday, Dec. 7, 2013 1:15 a.m. CST

Caption

(AP)

Traders on the floor of the New York Stock Exchange observe a moment of silence for the death of Nelson Mandela before the opening bell Friday. Mandela, South Africa's first black president, died Thursday after a long illness. He was 95.

Signs that the recovery is becoming more entrenched may lure more stock buyers back into the market, supporting prices, said JJ Kinahan, chief derivatives strategist at TD Ameritrade. Despite steady gains for the stock market over the last five years, some investors have remained wary of stocks after the collapse of 2008.

“We’re seeing good numbers,” Kinahan said. “Does this encourage people who have been underinvested all year to come in and spend some money on the market?”

Friday’s gains ended a mini-slump for the stock market in December. Fears of the Fed pulling back on its stimulus had made traders nervous when they saw the slew of good economic reports.

The good-news-is-bad-news attitude has at times stalled the market’s impressive run-up this year.

The S&P 500 index fell 1.5 percent in June when Fed chairman Ben Bernanke said that policy makers could start scaling back stimulus later in the year. In August, the market dipped again, falling 3.1 percent, as bond yields climbed in anticipation of the end of stimulus.

But those were brief interruptions. The S&P 500 has surged 26 percent, putting it on track for its best year in a decade.

Corporations have kept growing their earnings and the Fed’s stimulus has kept bond yields low, making stocks a more attractive investment relative to bonds.

In U.S. government bond trading, the yield on the 10-year Treasury note was unchanged at 2.87 percent from Thursday.

The bond market’s muted reaction to the strong jobs report may have been because the Fed was buying debt securities, said Jack Ablin, chief investment officer at BMO Private Bank. The central bank was scheduled to buy between $4.25 billion and $5.25 billion of Treasury notes on Friday, according to its monthly purchasing schedule, Ablin said.

Opinion among analyst is still divided as to when the Fed will start to cut back on its purchases. Most believe that policy makers will want to see a longer trend of improving economic data before they start cutting back. That makes a move at their next meeting, Dec. 17-18, unlikely.

“Everyone is still looking at the Fed beginning to reduce its bond purchases sometime next year,” said Kate Warne, a research principal at investment adviser Edward Jones. “The data was strong, but it wasn’t strong enough to change anything from yesterday.”

The Fed’s first two meetings next year are in January and March.

Among stocks making big moves;

– Intel rose 49 cents, or 2 percent, to $24.76, after a Citigroup analysts upgraded the company’s stock to “buy” from “neutral” because PC demand had stabilized.

– J.C. Penney fell 78 cents, or 8.8 percent, to $8.08 after the struggling retailer said late Thursday that the Securities and Exchange Commission is looking into its liquidity, debt and other financial matters, raising concerns about the company’s financial health.

– Barnes & Noble has also been talking to the SEC. The company’s stock fell $1.80, or 11 percent, to $14.58 on Friday after the bookseller said it was cooperating with the regulator on an investigation into its accounting.